The Minister of Finance answered a Parliamentary question on how the Belgian thin cap rules should be applied in practice to cash pooling activities. The Minister was asked a.o. how a daily assessment of the 5:1 debt-equity ratio links in with the netting of interest paid and received for cash pooling companies (for more information with respect to the Belgian thin cap rule, see http://www.pwc.be/en/tax-reform/belgian-tax-reform-2012.jhtml).
The Minister of Finance re-confirmed his position that the amount of debt (and thus the debt-equity ratio) of a company should in principle be evaluated on a day-by-day basis. However, he also stated that his administration is willing to investigate for certain financing activities on a case-by-case basis the possibility to calculate the net amount of non-deductible interest based on averages.
It was previously unclear whether the Belgian tax authorities would require a daily assessment of the net interest position of a cash pool for thin cap purposes. The Minister of Finance now confirms that his administration is willing to consider on a case-by-case basis more practical approaches based on averages.
No further guidance is given as regards the specific cases that would qualify for a more lenient approach or how the averages would then be calculated in practice. Should you wish to further assess the potential impact for your company, please do not hesitate to contact David Ledure for more information in this respect.